Designed to provide broad exposure to the Mid Cap Value segment of the US equity market, the First Trust SMID Cap Rising Dividend Achievers ETF (SDVY) is a passively managed exchange traded fund launched on 11/01/2017.
The fund is sponsored by First Trust Advisors. It has amassed assets over $337.26 million, making it one of the average sized ETFs attempting to match the Mid Cap Value segment of the US equity market.
Why Mid Cap Value
With market capitalization between $2 billion and $10 billion, mid cap companies usually contain higher growth prospects than large cap companies, and are considered less risky than their small cap counterparts. Thus, companies that fall under this category provide a stable and growth-heavy investment.
Value stocks have lower than average price-to-earnings and price-to-book ratios. They also have lower than average sales and earnings growth rates. When you look at long-term performance, value stocks have outperformed growth stocks in nearly all markets. But in strong bull markets, growth stocks are more likely to be winners.
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive counterparts if all other fundamentals are the same.
Annual operating expenses for this ETF are 0.60%, making it one of the most expensive products in the space.
It has a 12-month trailing dividend yield of 1.09%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund’s holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation to the Financials sector–about 31.70% of the portfolio. Industrials and Consumer Discretionary round out the top three.
Looking at individual holdings, Signature Bank (SBNY) accounts for about 1.16% of total assets, followed by Western Alliance Bancorporation (WAL) and East West Bancorp, Inc. (EWBC).
The top 10 holdings account for about 11.25% of total assets under management.
Performance and Risk
SDVY seeks to match the performance of the NASDAQ US Small Mid Cap Rising Dividend Achievers Index before fees and expenses. The NASDAQ US Small Mid Cap Rising Dividend Achievers Index is composed of the securities of 100 small and mid-cap companies with a history of raising their dividends and exhibit the characteristics to continue to do so in the future.
The ETF has added roughly 30.64% so far this year and is up about 40.41% in the last one year (as of 11/17/2021). In the past 52-week period, it has traded between $22.04 and $30.81.
The ETF has a beta of 1.24 and standard deviation of 31.81% for the trailing three-year period. With about 100 holdings, it effectively diversifies company-specific risk.
First Trust SMID Cap Rising Dividend Achievers ETF holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, SDVY is an outstanding option for investors seeking exposure to the Style Box – Mid Cap Value segment of the market. There are other additional ETFs in the space that investors could consider as well.
The iShares Russell MidCap Value ETF (IWS) and the Vanguard MidCap Value ETF (VOE) track a similar index. While iShares Russell MidCap Value ETF has $15.17 billion in assets, Vanguard MidCap Value ETF has $15.72 billion. IWS has an expense ratio of 0.23% and VOE charges 0.07%.
Retail and institutional investors increasingly turn to passively managed ETFs because they offer low costs, transparency, flexibility, and tax efficiency; these kind of funds are also excellent vehicles for long term investors.
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.
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